Circle Trade OTC crypto exchange doubles minimum, citing big market
Business is booming on big-money OTC cryptocurrency platforms despite price drops.
Circle Trade, one of the world’s largest liquidity providers and OTC digital asset marketplaces, has increased its minimum order size from $250,000 to $500,000.
OTC services are designed for high net worth individuals and institutions that want to make large crypto trades without upsetting the market, and according to Circle Trade's chief executive Jeremy Alaire in an interview with Business Insider, the size of OTC orders has grown since the beginning of the year even as the 24-hour volume on retail exchanges has dropped to about $20 billion a day, from highs of about $70 billion at the start of the year.
The average OTC order, he says, is now about US$1 million, with some exceeding $100 million.
"That watermark will continue to rise," he predicts.
Part of this rise might be growing institutional interest in cryptocurrency, while another large part might be the extra security of OTC trading for those who don’t want to entrust an exchange with large amounts of digital currency. Whenever there are reports of an exchange being compromised, OTC counters see a spike in volume.
However, the main point of these counters is to avoid expensive price slippage and the need to make dozens of different orders to complete a trade.
According to an analysis by OTC platform HiveEx.com, the mean value of a bitcoin trade on retail exchanges, as of 20 March 2018, was about US$49,000. However, the median trade value was only $645. This means that for every large trade on retail exchanges, there are countless much smaller ones.
Filling a larger order, in the six or seven digit range, might therefore involve churning through dozens or even hundreds of separate trades. This can be especially problematic with less-popular currencies like AUD, which are simply less widely accepted and tend to hang around smaller and more local exchanges.
HiveEx.com found that even on the highest-volume Australian retail exchange, BTC Markets, a $400,000 market order at the time would have involved 46 separate transactions.
Even in the US, where liquidity in retail exchanges runs relatively deep compared to Australia, OTC services are reporting growing interest across the board, with other platforms also telling Business Insider that their average trade size is growing. Circle Trade is still the biggest though, and it now trades more than $2 billion of cryptocurrency per month.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.
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